Iran: Budget Row Reflects Deputies' Domestic, Foreign Concerns

February 22, 2006 01:26 GMT

By Bill Samii

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Iran: Budget Row Reflects Deputies' Domestic, Foreign Concerns

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The Iranian parliament in session in November 2005 (AFP)
Iranian President Mahmud Ahmadinejad is facing his second crisis in the Iranian parliament. His budget for the Iranian calendar year 1385 (March 2006-March 2007) is being criticized by both right- and left-wing deputies. Much of the criticism is focused on the attention given to religious institutions that fit the president's conservative preferences. Another concern relates to excessive dependence on oil as the only source of revenue -- something that they say could have an inflationary effect. Some also argue that the government is basing its figures on an unreasonably high price for oil. Debates in the parliament suggest that Ahmadinejad's sloganeering and populist approach could meet its match in the realities of running the country.

Introducing The Draft Budget

When Ahmadinejad submitted his draft budget to the legislature on 15 January, he said his governments' priorities are the promotion of "justice, kindness, public service, and national development," the Islamic Republic News Agency (IRNA) reported. The total budget is $217 billion, with $68 billion allocated to the public sector and $149 billion to other state enterprises such as banks and nonprofit organizations. This latter total 27 percent more than in the budget for the previous year and indicates more attention to sectors considered less important by some deputies.

Government spokesman Gholamhussein Elham tried to put a brave face on the impact of sanctions, saying Iran is in a strong position and the nuclear issue will not affect the budget.

Mohammad Ali Hayati, a deputy from Lamerd and Mehr, said the budget has grown but it does not keep up with the needs of the education sector. He added that funds allocated for education have been falling since 2001, and the Education Ministry will have a 33 trillion rial (about $3.67 billion) deficit by the end of the year.

The Management and Planning Organization should explain how it came up with its numbers, Tehran conservative deputy Imad Afruq said, IRNA reported on 24 January. He added that the budget does not conform to the five-year (2005-10) development plan and that there are questions about the budget's compatibility with Supreme Leader Ayatollah Ali Khamenei's 20-year outlook. The budget reportedly allocates major funding for religious institutions, prompting Afruq -- who heads the legislature's culture committee -- to ask why the budget grew for "certain cultural institutes" when it remained the same for other institutions.

Another member of the culture committee, Jalal Yahyazadeh, was more blunt. "Culture is not just for the Islamic Publicity Organization or the Seminary Publicity Office," he said. "There are other important sectors like theater, and music -- that fit into the category of culture -- and unfortunately their budgets have not been given much attention," "Aftab-i Yazd" reported on 22 January.

Excessive Dependence On Oil Revenues

Even before the draft budget was submitted, legislators warned that it depends too much on oil revenues. Adel Azar, who represents Dehloran, Abadanan, and Darreh Shahr, said in early January that 70 percent of the budget is derived from oil sales, whereas in "advanced countries" only 35 percent of the budget comes from natural resources, "Kayhan" reported on 3 January.

Conservative legislator Mohammad Reza Mirtajedini said the budget's dependence on oil revenues increases every year, "Aftab-i Yazd" reported on 24 January. In 2002-03 it was $10.5 billion; three times higher in 2005-06 at $34.9 billion; and $36.8 billion for 2006-07. Other legislators and a Central Bank of Iran official feared that dependence on oil revenues will contribute to inflation, and an inflation rate of at least 20 percent is more likely than the projected inflation rate of 13.5 percent.

After the budget was submitted, complaints arose that it is based on an excessively high estimate of $40 per barrel. Hussein Kazempur-Ardabili, who represents Iran at the Organization for Petroleum Exporting Countries (OPEC), said, "oil's share in the budget must be reduced and oil must be priced lower," "Aftab-i Yazd" reported on 22 January. Abadan parliamentary representative Mohammad Said Ansari asked how the government would finance a deficit if oil prices fall below the $40 rate.

These expressions of concern appeared to have an impact, and Ahmad Tavakoli, who chairs the legislature's research center, announced on 12 February that the parliamentary Economy Committee has decided to reduce the budget's dependency on oil revenues by 25 percent, Fars News Agency reported on 12 February.

Oil On Every Table

Ahmadinejad's budget can be said to have remained true to some of his campaign pledges. One of Ahmadinejad's main campaign slogans was to bring "oil revenues to the people's tables," promising voters that they would benefit from oil revenues. Giving such a high priority to the role of oil in the budget could be said to represent the fulfillment of a campaign promise. Another campaign slogan was the creation of better living conditions for people across the country. When he introduced the budget, Ahmadinejad said spending in the provinces would increase by 180 percent, adding that he is trying to move jobs from the center to the periphery, and he emphasized rural development.

However, when the budget was submitted there was an outcry from several deputies about a lack of attention to the real needs of the provinces such as projects that focused on reducing poverty in deprived areas. More than 100 parliamentarians threatened to hold a sit-in during the 17 January session, "Sharq" reported the next day. Heshmatollah Falahatpisheh of Islamabad-i Gharb said provincial funding will be distributed unevenly and can contribute to deprivation. He asked why no funds had been earmarked for infrastructure projects in western Iran, adding that the incomplete western railway project symbolizes poverty in Kermanshah Province. "You said the poor can place their hopes in your administration," Falahatpisheh asked, "but why do projects of the ever-prosperous provinces always receive funds three or four times more than the funds allocated to this international project?"

Another legislator, Morteza Tamadon of Shahrekord, asked on 17 January why the budget says nothing about the establishment of provincial water companies, although the parliament passed a law on this the previous year, "Sharq" reported on 18 January. Tamadon then threatened to stage a hunger strike and a sit-in, and legislators from the Gulistan, Kurdistan, and Chahrmahal va Bakhtiari provinces indicated that they would participate.

Iraj Nadimi, a deputy from Lahijan, spoke of the hardships faced by farmers in the northern Gilan Province. He said fishermen and rice, tea, olive, and orange farmers are facing difficulties in Gilan Province, "Gilan-i Imruz" reported on 21 January. He said insufficient funds have been allocated to build dams and water-supply projects, and 6,000 families do not have access to running water, electricity, or good roads. Not all provinces are equal in the administration's eyes, he said, and it pays more attention to places like Qom and Isfahan.

An Iranian woman harvesting beans (AFP file photo)

Bojnurd representative Musa Servati complained about frequent visits by officials to the provinces that bring few benefits. He said that every two weeks the cabinet meets in a different province and ministers meet with locals to learn about their problems and concerns. However, according to Servati, the budget should be based on regional development indices rather than these visits. Servati said Ahmadinejad has already spent in excess of the 850 billion rials ($94.44 million) allotted for provincial trips in the previous year's budget, and he is commingling funds allocated to different provinces to pay for the trips.

Rural residents get inadequate attention, Kermanshah representative Jahanbakhsh Khanjani said, and the budget for villagers' medical insurance has fallen by 600 billion rials ($66.67 million), "Jomhuri-yi Islami" reported on 25 January. Hussein Islami from Saveh voiced similar concerns -- he asked why more money is allocated to city-dwellers for medical care, criticized the lack of funding for rural road-building projects, and said these problems will encourage urban migration.

New Concerns Arise

The possibility of Iran facing economic sanctions due to international concern over its nuclear program has contributed to legislators' apprehensions about the budget. Tehran representative Mohammad Khoshchehreh said the government should have a "pessimistic" outlook that allows for unexpected events and for an unfriendly international climate, "Aftab-i Yazd" reported on 6 February. He called for the adoption of a "shadow budget" and said the conservatives would support it. Khoshchehreh said the legislature is more realistic than the executive branch and explained, "It is possible that governments only think of their four-year term in office and all their efforts are geared toward flourishing in those four years."

Government spokesman Gholamhussein Elham tried to put a brave face on the impact of sanctions, saying Iran is in a strong position and the nuclear issue will not affect the budget. He said the executive branch does not endorse creating a "shadow budget" and suggestions that to do so would amount to a propaganda campaign. This statement certainly reflects a desire to reassure the business community and investors. It is, however, quite likely that the government is preparing for the worst.